A group of U.S. bankers has told top Federal Reserve officials that regulators’ focus on restraining bankers’ pay is creating “unnecessary tension.”
At a meeting last month with Fed Chairman Ben Bernanke and other top officials, executives said the Fed’s goals for bankers’ incentive compensation are a source of friction with regulators. Minutes of the May 11 meeting of the Fed’s “Federal Advisory Council” were posted Monday on the central bank’s website.
The advisory council has 12 banking industry representatives as members, including Citigroup Inc. CEO Vikram Pandit, Capital One Financial Corp. CEO Richard Fairbank and U.S. Bancorp CEO Richard Davis. Also present at the meeting were Fed Vice Chairman Janet Yellen and governor Daniel Tarullo.
The bankers said it is “commonly perceived” that banks’ performance goals will be criticized by bank regulators if they are not easy to meet and do not reward “exceptional performance,” the minutes read.
“Shareholders, however, rightfully want to encourage exceptional effort and corresponding performance, and doing so should not be viewed as inconsistent” with safe banking practices, provided that employees are punished if they take on too much risk that leads to losses, the minutes read.
After the financial crisis of 2008, U.S. lawmakers and regulators began scrutinizing executive and employee compensation at financial firms to try to stamp out any pay practices that could lead to dangerous behavior, such as the sort of betting on complex financial products that threatened the financial system in 2008.
Read more: http://blogs.wsj.com/economics/2012/06/11/bankers-complain-of-tension-with-fed-over-pay-restrictions/?mod=WSJBlog&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29&utm_content=Google+Reader
At a meeting last month with Fed Chairman Ben Bernanke and other top officials, executives said the Fed’s goals for bankers’ incentive compensation are a source of friction with regulators. Minutes of the May 11 meeting of the Fed’s “Federal Advisory Council” were posted Monday on the central bank’s website.
The advisory council has 12 banking industry representatives as members, including Citigroup Inc. CEO Vikram Pandit, Capital One Financial Corp. CEO Richard Fairbank and U.S. Bancorp CEO Richard Davis. Also present at the meeting were Fed Vice Chairman Janet Yellen and governor Daniel Tarullo.
The bankers said it is “commonly perceived” that banks’ performance goals will be criticized by bank regulators if they are not easy to meet and do not reward “exceptional performance,” the minutes read.
“Shareholders, however, rightfully want to encourage exceptional effort and corresponding performance, and doing so should not be viewed as inconsistent” with safe banking practices, provided that employees are punished if they take on too much risk that leads to losses, the minutes read.
After the financial crisis of 2008, U.S. lawmakers and regulators began scrutinizing executive and employee compensation at financial firms to try to stamp out any pay practices that could lead to dangerous behavior, such as the sort of betting on complex financial products that threatened the financial system in 2008.
Read more: http://blogs.wsj.com/economics/2012/06/11/bankers-complain-of-tension-with-fed-over-pay-restrictions/?mod=WSJBlog&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29&utm_content=Google+Reader
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